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Jackson: You want a guaranteed price?
Hartley: We want a price, sir, that in the event of World War III, and if the Middle East situation changes completely and suddenly, oil is back to $3 a bbl....
Jackson: Do you want a guaranteed price?
Hartley: We want a price, sir, that gives us protection—Jackson: You want...
Hartley: Please let me finish—a price recognizing that the world economic crisis is such that there is no security in the energy area. There are forces afoot that no businessman or even the U.S. Government has been able to contend with.
Jackson remained unmoved.
M.I.T. Professor Henry D. Jacoby warned that despite Jackson's objections, economic forces would drive up the price of oil sharply long before the U.S. actually depletes its reserves. "We are not going to run out of oil," he said. "It's just going to get prohibitively expensive to run the economy on it." Walter Levy, the pre-eminent international oil adviser, added that, as shortages become more severe, the U.S. could be placed in the politically perilous position of bidding against its own allies for oil. "There can be no Energy Fortress America," said Levy. "We may be successful [in outbidding allies], but we would not survive."
Levy, who advises oil companies and governments throughout the world, calculated that by 1985 the 24-member Organization for Economic Cooperation and Development club of industrialized nations will incur at least $270 billion in debts to pay for oil imports. Of the world's 140 oil-importing countries, only ten will be able to help themselves much by selling industrial and consumer goods to the OPEC nations. The less-developed countries will soon exhaust their already strained credit. Levy warned that the world must set up effective machinery to offset the one-sided transfer of wealth or face eventual economic chaos. "Financing can no longer be handled with mirrors," he said.
Chase Manhattan Bank's chief energy economist John G. Winger figured that during the decade that began in '75, the oil industry in the non-Communist world will require $1.4 trillion for new plant and equipment. Yet oil profits, after a spurt in 1973-74, have fallen to 4.7% of revenue, far too low to generate needed capital. Winger estimates that if inflation continues at its present rate, the oil companies by 1985 will be forced to charge $43.25 per bbl. to generate the sums needed for expansion. Such a huge oil price rise would force up prices of many other goods, speed inflation still more and force yet higher fuel rates.
INCENTIVES AND ROADBLOCKS. The U.S. can produce more energy—but only at far higher costs. Present efforts are being stymied by uncertainty about future Government policy, environmentalist objections and multilayered bureaucracies whose licensing procedures are needlessly timeconsuming.